Facebook’s new advertising platform

By November 7, 2007 6 Comments

I have been wondering for some time if Facebook has some tricks up its sleeve that might boost revenues, particularly revenue per user – something which will do for them what Adwords did for Google.

Now we know that they do, which is pretty unsurprising given all the big valuation talk.  Yesterday Facebook announced its new advertising platform.  Details are a little unclear but it appears to have three main components:

  • Social ads – which combine an advertisers message with actions from your friends – e.g. a product review or purchase
  • Project Beacon – which allows brands to find and work with advocates within the Facebook community, and then pump ads to all their friends
  • Insight – a data mining tool that allows brands to access social graph information on an anonymous basis

The first two are the interesting ones, and for me these ideas and are smart in theory – mostly because they leverage the trust relationships made explicit in Facebook.  That said, they will require very careful execution, and I wonder how scalable they are.

All things being equal an ad that has some information about what my friends are doing with a given product or brand is better than the same ad without that information.  That content is valuable and will cause people to take more notice of the ads – I have no doubt about that.  This idea is common to both Social Ads and Project Beacon.

The execution challenges will lie in stopping the ads feeling like a new form of spam, and in recruiting consumers into the system in large enough numbers to make it interesting.  Each of these would be a challenge on its own, and to make matters worse their is a clear tension between them.

If the ads were confined to the existing ad slots then they wouldn’t feel like spam at all, but there is a clear suggestion that they will appear in news feeds, which feels kind of dangerous.

Similarly, if brands go on a headlong rush to recruit consumers then things could get pretty messy.  By recruit consumers I mean either getting them to contribute to social ads by reviewing products or telling the system when purchases are made and getting them to sign up as beacons.

There are a few cool brands that people will flock to, and for which I can see this working very well – brands like Lego, and maybe even Nike, as well as a host of local brands, but for most, e.g. soap powder brands I suspect it will be difficult.  These predominantly FMCG brands could end up having to bribe people to get involved with promotions which would undermine the independence of the participation and hence the trust that the whole system is based on.

Returning to the logic above – the extra information in an ad that says one of my friends used or reviewed the product isn’t worth much to me if I think they might have done so in return for a free sample.

There are some similar, if more cynical, thoughts from Alan here.